India’s industrial production grew by 2.5% in March — the fastest in five months — but the full-year growth for 2012-13 recorded a two-decade low of 1%, prompting industry leaders and analysts to caution that the worst may not be over yet.
The government immediately said the data pointed to signs of a recovery. India is struggling to claw out of a decade-low slow growth of 5% seen in 2012-13.
“We are happy to see the numbers. This is exactly the trend we are hoping. If it (the trend) continues, inflation comes down and growth begins to pick up, I am confident that growth in current fiscal would cross the 6% mark,” said Arvind Mayaram, economic affairs secretary.
The 1% growth in the index of industrial production (IIP) in 2012-13 is the lowest since the 0.6% growth recorded 1991-92.
“This will be the second or third month in which the manufacturing growth will be positive. We were for a time in the negative territory,” said C Rangarajan, chairman of the Prime Minister's Economic Advisory Council.
Capital goods output growth remained positive for the second consecutive month, but analysts advised caution.
“A detailed look suggests that this is due to the volatile rubber-insulated cables category (up 247% y-o-y in March from 189% in February). Excluding this, the underlying trend in industrial production seems to remain weak, suggesting that the pickup ... is not broad based,” said Sonal Varma, economist at brokerage firm Nomura.